Has Delaware's Insurance Chief Gone Too Far?

By PETER KERR,

Published: July 21, 1992

WILMINGTON, Del.—
At a time when states are feeling increasingly poor, David N. Levinson might seem a white knight, having brought more than $100 million in investments into the state from companies operating outside its borders.

For seven years Mr. Levinson, the state's elected insurance commissioner, has put pressure on the insurance companies he regulates to invest in a list of local businesses drawn up by his office. What's wrong with hitting up these Goliaths for what amounts to small change, Mr. Levinson argues, to help a tiny state create desperately needed jobs?

But what Mr. Levinson sees as economic development, a growing number of lawmakers here see as a conflict of interest that falls somewhere between the blatantly bizarre and the oddly corrupt. They say Mr. Levinson is the latest example of just how far the state regulation of insurance can go awry. Critics in Legislature

A rising chorus of critics in the State Legislature say Mr. Levinson strong-armed insurance companies to invest in the companies he favors -- including those whose executives contributed to his campaigns. And he has forced contributions, they say, to one of his favorite and strangest causes: the betterment of Latvian-Delaware relations.

State Representative David H. Ennis, the Republican chairman of the House Banking and Insurance Committee, said he had received several complaints from insurance companies although none were willing to state publicly their objections for fear of retaliation. But the national trade group in Washington representing life insurers said it was troubled by the economic development program in Delaware. "We believe there is an inherent conflict of interest on the part of someone who on the one hand regulates the solvency of insurers and on the other hand is involved in promoting investments in the state," said Henri Bersoux, a spokesman for the American Council of Life Insurers.

Perhaps what frustrates his critics most is that Mr. Levinson seems unruffled by the accusations. He sees himself as "the toughest commissioner in America" and does not think fair-minded people would think he is acting in conflict. As he contemplates an independent run for governor, Mr. Levinson argues that he has become the victim of a powerful industry that punishes insurance commissioners who slip off its leash.

"I brought jobs to Delaware and refused to bow down to multibillion-dollar insurance companies and the lawyer/lobbyists to whom they pay millions of dollars per year to do their dirty work," Mr. Levinson said. "The industry went berserk."

The Delaware controversy comes at a time when the nation's system of state insurance regulation is under fire from members of Congress and state auditors who say that slipshod performance by insurance departments resulted in major insurance failures. The National Association of Insurance Commissioners has been aggressively developing new and higher regulatory standards for departments across the country.

One powerful Democratic Representative, John D. Dingell of Michigan, recently introduced legislation calling for Federal regulation of the industry in part because quality varies greatly from state to state. While states like New York and California are known for their vigorous enforcement, regulators in many states have long been criticized for being too cozy with the industry and its lobbyists. The image of the state-run system of insurance regulation was tarnished further by the conviction in the last two years of commissioners in Louisiana and Wyoming for corruption.

In Delaware, the state's House of Representatives this year investigated Mr. Levinson's program to promote economic development. Last month the House voted to prevent the commissioner from regulating companies that he has approached for investments or had personal financial dealings with. It also voted to turn over the records of its investigations to Federal and state law enforcement officials. The move failed in the State Senate, which instead voted to have the State Ethics Commission investigate, which now must render a decision.

Until now, Mr. Levinson had generally won praise for hiring a team of financial experts, computerizing a department with fewer than 100 employees and modernizing its operations since he was first elected in 1984.

The commissioner, whose father was a small-town mayor and well- known veterinarian in the state, was educated at Harvard, and made millions in the real estate business in the Midwest. He returned to Delaware in the early 1980's to enter public life. Tall and slender with an easy charm, Mr. Levinson has both dazzled and enraged politicians here who described him, varyingly, as brilliant and arrogant.

"The commissioner has done an exceptionally good job of running his office," said Edward J. Bennett, a Democratic State Representative. "But he has taken personal loans, trips, introductions across the oceans and still has not recused himself from decisions on the companies that gave them those things."